Comment: Is Abu Dhabi targeting Intel rather than TSMC?

With Waleed Al Muhairi, chief operating officer of Abu Dhabi government investment vehicle Mubadala Development Co., predicting Abu Dhabi would be making chips at home within four years, we are reminded that the Gulf states' aspirations to get into the chip business are long-enduring. But when Al Muhairi said Abu Dhabi wants to compete with Intel was that hubris?

LONDON  With Waleed Al Muhairi, chief operating officer of Abu Dhabi government investment vehicle Mubadala Development Co., predicting Abu Dhabi would be making chips at home within four years, we are reminded that the Gulf states' aspirations to get into the chip business are long-enduring. But when Al Muhairi said Abu Dhabi wants to compete with Intel was that hubris?

Mubadala has a 19.9 percent stake in Advanced Micro Devices Inc. (Sunnyvale, Calif.) which has been the leading but struggling competitor to Intel in the PC processor business.

There would be a certain irony in the fact that the region's first attempt to get into chip making  through Communicant Semiconductor Technologies AG  was started with the help of a process technology supplied by Intel Corp.

It was the United Arab Emirate city-state of Dubai that had that ambitious plan to learn about chip making through a $1.5 billion project to build a silicon-germanium wafer fab in the former East German region of Brandenburg. Launched in February of 2002 with a production target date of early 2003, Communicant never got beyond the development stages although construction of the fab shell at Frankfurt-Oder near the Polish border was begun. A chip market recession helped put paid to that plan along with the realization that small sums heavily leveraged to get to $1.5 billion was never going to be enough.

Now we have Abu Dhabi punting as much as $10 billion to get into foundry chip making through the Globalfoundries vehicle with wafer fabs appropriately being planned all around the globe. There is the Dresden inheritance from minority owner Advanced Micro Devices Inc., major investment planned in upstate New York and the plant belonging to Chartered Semiconductor Manufacturing in Singapore.

It should therefore come as no surprise that Abu Dhabi wants to also manufacture chips at home, that was always part of the Gulf-states' agenda, from the days of the Communicant debacle.

There is no business model that would deliver the expected return on investment for placing a fab in Dubai. Also why would you invest in the high cost of sourcing staff as expats into such a region and expect a good return. Next you have suppliers (ie. AMAT, LAM, Novellus, etc) who must place offices and infrastructure in the region which may not be willing to make such a move. If you have not noticed the majority of our electronic supply chain is from APAC, and getting technology in and out of Dubai would be a challenge I would not bet on for my production.

I wonder how many engineers would be prepared to move lock stock and barrel to Dubai or Abu Dhabi to pursue their careers. There may be good money, no taxes and luxorious leisure facilities but engineers might also find themselves living entirely within a gated community with other expatriates?